If the ICAPM beta is 1.2,and the world market return and risk-free rates are 14% and 6% respectively,then the expected return predicted by the ICAPM is:

A) $ 12.0\% $
B) $ 14.8 \% $
C) $ 15.6 \% $
D) $ 16.4 \% $

Question

If the ICAPM beta is 1.2,and the world market return and risk-free rates are 14% and 6% respectively,then the expected return predicted by the ICAPM is:

A) $ 12.0\% $
B) $ 14.8 \% $
C) $ 15.6 \% $
D) $ 16.4 \% $

Quizplus · Accepted Answer

Using equation 12.1,we can calculate the expected return predicted by the ICAPM as follows: 0.06 + 1.2 (0.14 - 0.06)= 15.6%.

If the ICAPM Beta Is 1 12.0% 12.0\% 12.0% B) 14.8% 14.8 \% 14.8%

If the ICAPM Beta Is 1 $12.0\%$ B) $14.8 \%$